NO. 20 -- May 23, 1997


Feature Article


Japanese-Russian relations have been stuck in neutral for years. Tokyo was optimistic that President Boris Yeltsin's October 1993 visit to Japan finally would create some forward movement. At that time the Russian reformer pledged to approach resolution of a decades-long dispute concerning joint claims to four islands northeast of Hokkaido -- which Japan calls the Northern Territories -- based on a 1956 bilateral agreement. This accord stipulated that Russia would return two of the four disputed islands after Tokyo and Moscow signed a treaty formally ending World War II between them.

Most observers regarded Mr. Yeltsin's advocacy of the 1956 formula as indicative of greater flexibility on Moscow's part; for more than 30 years the Russian government had refused even to acknowledge a territorial grievance with Japan. Tokyo during this time had been equally adamant in refusing to relinquish its claims to the North Territories, linking the availability of large-scale economic aid to Moscow's recognition of Japanese sovereignty over the four islands.

A breakthrough on the territorial impasse has proved illusive, however. Faced with an increasingly powerful nationalist bloc that threatens to undermine Russia's reform movement and to wrest control of the government, Mr. Yeltsin has been too weak politically to deliver on his 1993 promise concerning the partial return of the disputed territory. Japanese foreign policy professionals, in turn, have recognized that the climate of uncertainty in Moscow warrants a new approach to Japanese-Russian relations -- one that allows for fuller development of political, economic and cultural ties. Thus, Tokyo in the past four years has engaged in various confidence-building measures, such as initiating exchanges of high-level defense officials, participating in security-related discussions involving American, Japanese and Russian participants, and providing greater amounts of humanitarian aid as well as technical assistance and loans to facilitate Russia's transition to a market economy.

To further engage the former communist country in the development of the Asian regional economy, Tokyo has encouraged Sea of Japan coastal prefectures to develop ties with local governments in the Russian Far East. In addition, corporate Japan has shown interest in participating in a multinational effort to develop oil and natural gas reserves in Sakhalin and to construct a port near Vladivostok. Nonetheless, the uncertain outlook for Russia's market reforms, the extraordinary debt already owed to Japanese concerns, rampant crime and corruption, and the volatility of the political scene may continue to constrain Japan's economic relations with its neighbor.

While not nearly as frosty as in years past, Japanese-Russian relations in the near term will be challenged by issues other than the territorial dispute. The two sides may clash over Moscow's responsibility for the environmental damage caused by a massive oil spill in the Sea of Japan this past January. Japanese fishing rights in the waters around the four contested islands also remain a bone of contention. The recent agreement between Russia and the People's Republic of China establishing a strategic partnership concerns the Japanese government as well. However, insiders attribute Tokyo's bridge-building efforts with Moscow more to the government's goal of eventually resolving the Northern Territories dispute than to an attempt to drive a wedge between the two regional powers.

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Weekly Review

Japan's Current Account Surplus Reversed Course In First Quarter by Douglas Ostrom

A long-expected development has arrived but barely ahead of factors that could launch a journey to a different outcome over time. Just as economists have been predicting for months, the multiyear decline in Japan's external imbalance has come to an end -- a consequence of the unrelenting rise of the dollar vis-a-vis the yen beginning in late spring 1995 and lasting through April 1997. Experts uniformly point out that a cheaper yen makes life easier for Japanese exporters but harder for firms hoping to sell imported goods in Japan, with the result that the nation's current account suprlus eventually will rise.


Tokyo Adopts Road Map For Structural Reform by Jon Choy

The cabinet of Prime Minister Ryutaro Hashimoto has committed the government to a wide-ranging program of reforms and changes in laws, regulations and practices, all aimed at keeping Japan in "a leading position in the global market in the coming century." The Action Plan for Economic Structural Reform and Creation, adopted May 16, is a more detailed version of ideas presented to the cabinet last December. It represents one of the six major reforms that Mr. Hashimoto promised to deliver during last fall's campaign for the lower house of the Diet.


Terrorism, U.N. Reform Get High-Level Attention In Tokyo by Barbara Wanner

Promoting greater engagement in international affairs in general, the Ministry of Foreign Affairs in the 1997 edition of its annual review of the state of the world and Japan's diplomacy over the past year placed antiterrorism initiatives at the top of the list of global issues that Japan must tackle with other countries. The so-called diplomatic blue book, released May 9, noted that the international community "has reaffirmed at various meetings that countries need to take a tough stance against terrorism." The document went on to urge Tokyo to participate more actively in the international fight against terrorism.


Fast Track Stuck In The Slow Lane
--- by Christopher B. Johnstone

Despite regular Clinton administration rhetoric extolling the virtues of free trade, renewal of the president's lapsed fast-track negotiating authority may have to wait until 1999 &endash;&endash; and, possibly, until after the 2000 presidential election. Citing other items on Capitol Hill's agenda, the White House has indicated that it may wait until September to present a detailed proposal for new negotiating authority.

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